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Options Strategy: Weekly Options Strategy: A Nifty50…

Strategy Positions:

Short Nifty 21 July 2022 15900 Put at 60 & buy 14 July 2022 15600 Put at 15, Total premium inflow= 45; Target: 1; Stop loss: 65 (1 Lot Each)


Rationale


The Nifty lost almost 1 % last week as Technology heavyweights came under pressure after their below than expected quarterly results. Meanwhile broader markets have done relatively better as Pharma, Auto and FMCG stocks took the lead. The extended pressure in markets was experienced after 4 decade high US inflation numbers. However, Nifty was able to hold 15900 levels and till these levels are held, we remain positive for the coming sessions.

From a data perspective, while Put writing is relatively higher than the Call strikes with highest Put base placed at ATM 16000 strike, we expect a round of recovery towards 16500 if Nifty is able to hold 15900. The bias will be changed if Nifty closes below 15900 and in that scenario, we may see Nifty moving towards 15600 in coming sessions.

FIIs’ net short positions have increased once again above 1 lakh contracts and majority of these positions were formed after US inflation numbers. Hence we believe these positions are susceptible for short covering and Nifty may witness further recovery ahead of crucial events lined up in the second half of the month.

The volatility index has closed the week at its lowest levels seen since January below 18 levels. Moreover, despite recent weakness seen in Banking and Technology space, Nifty was largely able to hold its levels. Hence, while stock specific volatility is likely to remain high amid the result season, broader weakness is unlikely till VIX is not moving above 20 levels.

Trader will be in maximum profit if Nifty closes above 15900 levels on 21th July expiry.

Payoff diagram2Agencies

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